CA Cannabis Industry Responds to Governor’s Vision of the Future

California readies to merge medical and adult-use cannabis.

[dropcap]M[/dropcap]erging some of the nation’s oldest medical marijuana laws with a new recreational future is no small task, this week saw the California cannabis industry hit Sacramento to give their thoughts on what the union of the two landscapes will look like.

As with November’s legalization vote, people are drawing their lines in the sand. Every aspect of the industry and consumer experience will live under the scrutiny of whatever the capital comes up with, from the mom and pop with 30 years in Mendocino to the kid entering a dispensary on his 21st birthday, it’s really that encompassing. The discussion around merging the ongoing aftermath of the Medical Cannabis Regulation and Safety Act and the Adult Use of Marijuana Act was always going to be a contested one. Folks are starting to line up on both sides of the fence.

“It’s an exciting time to take part and watch the cannabis regulatory structure take shape,” said Sabrina Fendrick, government relations director for the nation’s oldest dispensary, Berkeley Patients Group. “The trailer bill is just one of many stages this new regulatory process will have to go through and is well on its way to becoming a national model for non-medical cannabis policy.”

Fendrick doesn’t believe the internal debate among the industry will be able to hold the reigns of progress in the obvious major transitions to come saying, “While there is a robust debate surrounding the developing regulations, I am confident we will be able to navigate these uncharted waters together and create a successful, sustainable framework for the state and the industry.”

The list of names backing the current version of Governor Jerry Brown’s vision includes The California Cannabis Industry Association, California NORML, Law Enforcement Action Partnership, United Food and Commercial Workers International Union, Americans for Safe Access, Los Angeles Cannabis Task Force, International Cannabis Farmers Association the Drug Policy Alliance and the California Cannabis Manufacturers Association.

Though these organizations are choosing to put their weight behind what they consider progress, they’re quick to admit there is still plenty of work to be done. One fix still needed is co-locating recreational and medical cannabis distribution points in the same location.

“CCIA supports the trailer bill language and sees it as an important step forward in reconciling MCRSA and AUMA,” said CCIA President Sean Luse. “Our only concern with the bill is the prohibition on co-locating medical and adult-use facilities. This provision will place an unnecessary burden on operators and local governments and will ultimately limit patient access.”

While Americans for Safe Access hasn’t released an official statement yet, Co-Founder Don Duncan echoed the concerns raised by Luse to Cannabis Now.

“I would like to see an amendment to allow medical and adult use licensing on the same premises,” Duncan said. “Requiring separation for the entire supply chain may artificially limit the capacity of the medical cannabis industry to serve patients. “

As with their fellow advocates, California NORML’s main reservation was the dual location, but the organization is happy with the spirit of the legislation.

“We are glad that for the most part it follows Prop 64 instead of MCRSA, for example with respect to eliminating the independent distributor requirement,” said California NORML Executive Director and Prop 215 activist Dale Gieringer. “Also, eliminating the ID card requirement would make the tax break for medical patients more widely available.”

Other concerns have caused some to reject the bill outright. In a letter to Governor Jerry Brown last week, the California Grower’s Association did just that over the proposed removal of Vertical Integration limitations originally enacted in the Medical Cannabis Regulation and Safety Act.

From the letter:

It is imperative that California strikes a better balance on cross licensure. As written, the proposal will lead to rapid consolidation of the marketplace, a significant barrier to entry and an even more significant barrier to success. The result is that few cottage, specialty and small businesses (both existing and startup) will remain viable. Under a system of unfettered vertical integration access to capital will become the primary driver of success and most of our members have severely limited access to such resources.

Cannabis Now reached out to California Growers Association Executive Director Hezekiah Allen to expand on the organization’s concerns.

“Without reasonable limitations of size and scale of vertical integration there is an unmatchable competitive advantage that can be gained by businesses owning every segment of the supply chain with no limits on scale,” Allen said.

Allen went on to point to the system around wineries and microbreweries as exactly what they’re looking for.

“But if Anheuser-Busch owned BevMo, there wouldn’t be microbrews and that’s what’s being proposed currently,” he said.

Allen called for Sacramento to strike more of a balance going forward and said the idea that unlimited vertical integration is going to do anything other than creating a marketplace dominated by conglomerates is, “foolish and not supported by anything of substance historically.”

We asked Allen if one of CGA’s concerns was that big money will simply wait out the restrictions and still be ready to jump in, backed by their massive coffers, once they have expired.

“Exactly, as soon as the restrictions are gone, maybe we can delay this five years but you know our folks don’t have exit strategies,” Allen said. “Our folks aren’t trying to build a business to sell. These are family businesses, we’ve been doing this for decades if not generations.”

Allen said the protection these folks need should to be real, permanent, and immediate, “so we don’t get off to the wrong start, this isn’t something we’re going to get a second chance at.”

Everyone agrees that the microbusiness permitting aspect of AUMA should be included in the final plan, but more details are needed.

“We’re strongly supportive of the microbusiness, but obviously if the business is required to get four permits that won’t work,” Allen said, continuing in stating that the language needed to be specific because if it wasn’t that would be exactly how the state would implement it. “It’s a cute idea but at the end of the day, it doesn’t matter if there aren’t any limits on vertical integration.”

We asked Allen about the support for the bill coming from across the marijuana policy space

“I’m not sure how other organizations reach their policy positions,” he said. “Cal Growers is the largest cannabis business association, with more than 1,000 business members statewide. We take our time to carefully review policy positions. Our focus is on our member’s needs, not the politics.”

Allen closed emphasizing people also need to understand the difference between distribution and vertical integration, he believes those who have the most to gain are attempting to blur that line.

Prop 64-backer Dr. Amanda Reiman is one of the folks leading the cheering section for the unification.

“I think folks have to remember it’s not that subjective in term of how the reconciliation comes about,” she said. “There are rules about you’re trying to reconcile legislation and an initiative.”

Reiman noted in a technical sense, initiatives are much stronger than legislation.

“It makes sense that when reconciling Prop 64 and MCRSA, 64 will win out most of the time,” she said. “It’s not a values statement, buy what has to be chosen given the legalities of the situation.”

Reiman likes the trailer bill because it sticks so closely to Prop 64 and the way, “voters decided they wanted cannabis to be regulated.” She continued by noting that MCRSA represented the will of the legislators.

“We didn’t put it to the vote of the people and I think it’s important we recognize the goal of cannabis regulation in California,” she said.

“The goal of cannabis regulation in California is not to create a whole new industry, it’s not to create a whole new industry for the teamsters, or the alcohol industry. The goal is to give opportunities to people already operating as cannabis businesses in the state of California the opportunity to become legal and compliant businesses.”

Reiman said in order to make that happen options had to be kept open within the scope of the law.

“We’re going to stand behind a framework that gives as many opportunities as possible to businesses already in existence,” she said.

We asked Reiman the counter argument, the idea that this open playing field without limitations on vertical integration would devastate small farmers. She said when talking about new businesses coming online in cannabis, it’s going to be hard for everyone because of oversaturation in the marketplace.

“If our goal is to get as many people already operating to be compliant businesses, I think the difficulty is going to be getting into a market that’s already full,” Reiman said. “I think regardless of how current operators are forced to exist, the new operator in this market is going to have the most difficulty.”

She thinks this to be true for anyone, “whether the little guy or the big guy.”

Reiman also said there are a lot of folks afraid if we give them a very narrow definition of how they can exist moving forward that a lot of them will not survive because the changed will be insurmountable to them.

“Think if the little guy and give them the flexibility to take their product straight to the consumer,” Reiman said.

In the end, Reiman pointed to the realities of prohibition in what might occur if things don’t go as planned.

“My fear is that if we put all these restrictions on the licensure at the state level it’s not going going to stop people from vertically integrating, it’s just going to allow the people that have the capital and the sneakiness figure out how to get around it,” she said. “The little guy isn’t going to find a way around it, that’s one of my concerns. We’re creating a situation where the only guy who can get over the hurdles are the ones who have the capital to do so.”

Despite thoughts on the bill not always being aligned on the trailer bill as a whole, generally the fears of how extreme amounts of capital beating the game are resounding.

“I said a million times on the campaign trail for Prop 64, cannabis legalization is going to do a lot of things but it’s not going to take down capitalism,” Reiman said.